There have lately been a number of articles, newsletters, Twitter threads, and attempts at jokes about Elon Musk’s Twitter takeover. This makes sense. It is a big deal, involves a lot of money, and raises questions like, “free speech?” While there are more pressing global developments than a billionaire carnival barker buying arguably the least successful major social media platform, most don’t involve the occupational requirement and begrudging addiction of the domestic media industry. The fallout is that, for a time, the New York Times homepage had two live-update tickers — one was for the war in Ukraine; the other was for Twitter.
If you have been ignoring these updates, the gist is this: Musk started to buy up Twitter shares in January. By March, he owned 9.1 percent of its stock. In April, he announced that he was the company’s largest shareholder, which sent Twitter’s stock surging. Twitter invited him to join their board of directors. Elon accepted, then tweeted some stupid stuff about Twitter, and very quickly backed out. He came back with an offer to buy Twitter outright for $54.20 a share — this was a weed joke — and take it private.
Musk, who often makes bold offers without the cash to back them up, didn’t have the funding to actually follow through. Twitter adopted a “poison pill” plan, a defense strategy companies can implement to fend off hostile takeovers. Then Musk got the money. Earlier this week, Twitter accepted Musk’s proposal. The merger agreement dropped on Tuesday. Now they’re hashing out the details, which could take months.
What does it mean? A lot of people have been trying to answer that question, and because of Musk’s signature unpredictability, no out-of-the-box theory can be immediately ruled out. Let’s explore.
Why Would He Do This:
The Computer Game
Bloomberg columnist Matt Levine, who writes one of the best newsletters in a moment of many newsletters, has been blogging about Elon Musk for a long time, and about the Twitter situation for nearly a month. Those blogs are all worth reading, but this interview with Isaac Chotiner is a good shortcut. An even shorter summary might be this excerpt Chotiner cites from Levine’s newsletter:
Look, this all makes complete sense, obvious, intuitive, simple sense. If you are the richest person in the world, and annoying, and you constantly play a computer game, and you get a lot of enjoyment and sense of identity from that game, maybe a little addicted, then at some point you might have some suggestions for improvements in the game.
The Giant Package
Ranjan Roy, a former trader turned business writer and co-author of the Substack “Margins,” wrote a post on Monday called “Elon’s Giant Package.” The CliffsNotes version is that, back in early 2018, Tesla released an SEC filing that outlined a very, very, ambitious growth plan. Specifically: it bet Musk’s entire compensation on meeting specific goals for Tesla’s revenue, Adjusted EBITDA, and market cap; the latter of which, they aimed to increase elevenfold.
At the time, this was considered “laughable.” But in the intervening years, Tesla’s stock — and Musk’s wealth — skyrocketed to a cartoonish degree. For reference: when the announcement went out, Musk’s net worth was roughly $12 billion. It is now $264.6 billion. Much of this growth correlated with Musk tweeting about and freely publicizing the company. Roy writes:
Ever since the Spring of 2013, it was clear Tesla’s business results and Musk’s tweeting could have a self-reinforcing impact, and that virtuous cycle only became more clear in recent years. Shortly after Musk signed his giant package, the really high-volume tweeting began, and the rest is wealth accumulation history.
As a result, “Elon understands his access to tweeting is existential to every element of his business.” But Musk’s ongoing and escalating feud with the SEC has limited some of his tweeting abilities. As such, Roy theorizes that the Twitter offer was partly defensive — a move to ensure “his Twitter account cannot be limited, and certainly, never banned.” He also sees it as a broader offensive strategy to meet the Tesla growth goals on which Musk’s entire pay package relies:
My mini-grand theory is that this entire sequence of events: The Twitter purchase, the SEC escalation, Tesla’s blowout quarter - it’s all about the next giant package. Musk saw an opportunity at the beginning of the year. Tesla’s business was on a roll, his pay package was almost complete, the SEC was threatening his Twitter account, and Tesla’s stock had stalled out for six months. Every great entrepreneur understands the importance of momentum and he decided to capitalize on this confluence of events.
How Would He Do This:
The Merger Agreement
Here’s a good thread from appellate lawyer Raffi Melkonian live-tweeting the merger agreement, which as we discussed, went online Tuesday. The deal is technically a merger because to conduct the sale, Musk will form a company, throw money at that company, merge that company with the company we call Twitter, pay Twitter’s shareholders with the money he threw in, and dissolve the company he formed. Then he’ll own Twitter and Twitter will be a private company, rather than the publicly traded one it is now.
Three interesting details: First, if Musk backs out of the deal, he’s obligated to pay a $1 billion termination fee. Second, Musk is allowed to back out of the deal if something bad happens, but the bad thing cannot be “backlash about Elon Musk.” Third, Musk is allowed to tweet about the deal, but “not if he insults Twitter.”
The Fake Out
A recent opinion column in Reuters titled “Elon Musk probably won’t buy Twitter” raises the point that Elon Musk is a flake — a flake who, four years ago, swore he would “set up a peanut brittle company to take on Warren Buffett’s iconic U.S. confectioner See’s Candies” and then backed out. Among other things, the writers underscore the fact that Tesla’s stock, on which much of Musk’s wealth relies, has plunged since he went public about his Twitter stake. If Musk backed out of the deal and the price rebounded, they argue, this would cover the billion-dollar termination fee. It’s a longshot.
What Will Happen:
Same Old Story
It’s easy to get the impression that Musk’s ownership of Twitter constitutes a grand transition in the platform’s trajectory. Some have argued, like cravat-lover Nathan J. Robinson, that when Musk owns Twitter, “every tweet you send is performing free labor for him and using your personal free time to increase his wealth.” That may be the case. But the new looks a lot like the old here. In a piece for Vice, Edward Ongweso Jr. counters:
In that framework, we were doing free labor for Twitter shareholders like Vanguard Group, BlackRock, and the Saudi royal family before Musk’s acquisition. Both Vanguard and Blackrock have undoubtedly done more harm than Musk to this world through just one section of their portfolio―they are some of the world’s largest investors in fossil fuels―and the Saudis are busy committing war crimes against Yemenis, so it’s hard to argue that a moral calculus that allowed us to freely shitpost for their benefit would now compel us to stop. Twitter was always a vehicle for billionaire cash, just not from ones with a taste for publicity like Musk.
The piece weighs several popular takes from Musk critics on intervention, moderation, and alternative platforms that might reduce reliance on libertarian billionaires. One of the more interesting suggestions of the latter is “adversarial interoperability,” or the idea of creating, per Cory Doctorow in the Electronic Frontier Foundation, “a new product or service that plugs into the existing ones without the permission of the companies that make them.”
But the gist of Ongweso’s point is that this merger might not be as revolutionary as the reaction implies: “Instead it’s just a very old story: A very rich person using money to control not just what people say, but where they say it,” he writes. “The other part of that story is the people trying as hard as they can—and often winning—in a world where everything is, in one way or another, owned by the very rich.” Great.
Old Gawker’s Max Read, another newsletter guy, wrote about what might happen if and when Musk wrenches Twitter from the board’s tweeting hands. His proposal: also not much. Read’s rationale is that Musk, unlike many of the platform’s begrudging users, actually likes how it works. He tweets and his stock goes up. That’s at least a quadruple dose of your standard fave serotonin:
The average person's experience with Twitter is, like, being ignored by celebrities they reply to and trying to figure out what the fuck "Loona" is. Elon Musk's experience with Twitter is that he tweets, and then, whatever he said, whatever the context, he becomes richer. Why would he do anything to change that?
If anything, Read argues, Musk could very well be responding to the fact that Twitter is finally curbing “years of aimless misrule.” From that perspective, “Elon Musk didn't buy Twitter to transform it; he bought it to make sure it stays the same.”
That may be the case. Unfortunately, the coverage of this deal is changing every day. Much of what I’ve just summarized may well be dated by the time this post goes live. For all our sakes, we can only pray the New York Times brings back the live ticker.